Macao’s Gambling Monopoly in China Ending?: MGM Resorts International (MGM) and More

What It Means

For Wynn Resorts, Limited (NASDAQ:WYNN), Las Vegas Sands Corp. (NYSE:LVS) and MGM who already have casinos in Macao, honestly, it won’t mean much in the near term. There is so much pent up demand in China and gambling- it’s almost their national past time.

However, they might have to compete and give away more to attract the high rollers (whales) than they used to and as gambling spreads throughout Asia, much like Las Vegas, the oversized margins generated will gradually reduce in size. The expansion of legalized gambling throughout Asia will likely mirror the effect of spread of gambling in the US on Las Vegas and Atlantic City.

To gain an understanding of how important VIP play, I cite fellow Motley Fool writer Travis Houim and his column on understanding casino earnings which is really an excellent lesson in reading the quarterly report.

The point of inserting these numbers is so you can be aware just how dependent earnings, especially for Wynn Macao, are dependent on VIP play, and how the expansion of gambling, and the various new junkets will put pressure on margins as they will offer these whales percentages of losses back/ more goodies to keep them playing at their tables.

Update

According to this Reuters column the cashless casino was just closed this morning, several days after this column was originally written. There is no doubt that interests in Macao used what leverage they have in the government to get the project shut down. Ahhh … the soap opera of big business.

Nevertheless, economic factors, much like in the US, will eventually see gambling expand throughout China. You can bet on it.

The article Macao’s Gambling Monopoly in China Ending? originally appeared on Fool.com and is written by Margie Nemcick-Cruz.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.